Black Friday: The power of the supply chain to dictate prices

Between flashy flyers and promotional emails, a divide has emerged between retailers big and small this Black Friday.

On one side are retail giants with complex supply chains and high inventories. They’re offering deep and extensive discounts, often accompanied by free shipping and interest-free plans.

Smaller stores, on the other hand, are grappling with ongoing supply chain headaches and rising costs, with less room for big discounts.

For consumers, that means the best deals may not be on the items they want or from the retailers they want to shop from.

“Many retailers have slashed prices a bit because they don’t have the inventory to support those blockbuster deals,” said retail analyst Bruce Winder. “Sales are at a low level.”

Smaller brands and independent retailers tend to offer around 25% off regular prices, with some deeper discounts on out-of-season and discontinued items.

Canadian apparel brand Duer, for example, is offering modest discounts on their most popular vintage items, with larger sales for out-of-season or designer items that are also not selling.

“We offer discounts on our core … styles during Black Friday,” said Michael Macintyre, chief executive officer of Vancouver-based Duer. “But deeper discounts on items that are in season or out of production.”

Inflationary pressures and supply chain issues have led many retailers to approach Black Friday discounts this year, he said.

“Retailers will manage discounts to capture a slightly higher gross margin on sales to cover some of the logistics costs,” says Macintyre. “But it will also be a bit dynamic, so Black Friday deals are subject to change and change based on demand and inventory.”

However, as small and midsize retailers carefully curate sales to attract shoppers while maintaining high margins, larger chains are offering a wide range of deals, many some of which began a few weeks before Black Friday.

For example, Amazon has announced that it will have “more deals than ever” with “deep discounts on top products” during its 48-hour Black Friday event from November 25 to 26.

Canadian Tire is also rolling out hot deals for Black Friday, with dozens of items 70% off regular prices and a few items up to 85% off. The company recently purchased a stake in a BC inland port facility to strengthen its supply chain.

“Companies with really strong supply chains are doing well,” says Winder. “If you have the inventory and the logistics in place, you’re not going to take a chance because you know you can take some market share this year.”

However, pre-holiday research shows that shoppers will go all out, spending dollars at both local businesses and larger stores.

Multiple surveys have found that pent-up demand and fear of shortages have encouraged consumers to remove items early from their lists, spurring holiday shopping even earlier. with the typical “Black Friday” observed in previous years.

Black Friday is officially November 26 this year, while Cyber ​​Monday is November 29, but sales have been running for a few weeks now.

“Black Friday is no longer a day, it’s a shopping season,” said Tandy Thomas, associate professor of marketing at Queen’s Smith School of Business.

“Retailers are boosting sales because consumers are looking for deals and buying sooner.”

She added: “The perception of scarcity has also pushed the timeline even earlier this year.”

Indeed, Mastermind Toys CEO Sarah Jordan said shoppers requested the store’s signature holiday gift wrap in August – four months before Christmas.

“Holiday shopping will definitely peak earlier,” she said. “We just had the best October in the company’s 37-year history.”

The Toronto-based toy retailer sold out one of the hottest toys of the year – the magical misting cauldron Magic Mixies – twice. Both times, the toys were out of stock within 24 hours of opening.

Research done in the period leading up to the holiday shopping holiday predicted a year of big spending.

“Canadians are expected to spend more this season than they did before the pandemic, with many consumers saving and feeling optimistic about the economy,” Deloitte Canada’s Holiday Retail Outlook said.

Overall, Canadians plan to spend an estimated $1,841 on the holidays, compared with $1,405 last year — a 31 percent increase, Deloitte said in its holiday report. This is also about 8% higher than the $1,706 reported in 2019.

Deloitte also noted that rising concerns about supply chain issues and potential product shortages will convince many Canadians – especially those who have weathered the pandemic – to start shopping early. The report found that 35% of holiday shoppers said they plan to start shopping before November.

Meanwhile, brands that overcome supply chain challenges can win new customers, Deloitte reports.

“Any company or brand that is seen as having to overcome supply chain challenges can win new customers in the long term.”

This Canadian Press report was first published on November 24, 2021.

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